Rothstein v. Tennessee Gas Pipeline Co.
| Decision Date | 09 September 1997 |
| Citation | 664 N.Y.S.2d 213,174 Misc. 2d 437 |
| Parties | , 1997 N.Y. Slip Op. 97,542 Rhoda G. ROTHSTEIN, as Executrix of Ari Rothstein, Deceased, Plaintiff, v. TENNESSEE GAS PIPELINE COMPANY, Formerly Known as Tenneco, Inc., et al., Defendants. |
| Court | New York Supreme Court |
Weil, Gotshal & Manges, L.L.P., New York City (Peter A. Antonucci, of counsel), for Chromalloy American Corporation and others, defendants.
Dechert, Price & Rhoads, New York City (Robert A. Cohen, of counsel), for Tennessee Gas Pipeline Company and another, defendants.
Laurence H. Pearson, New York City, and Levy, Angstreich, Finney, Mann & Burkett, P.C., Philadelphia, PA (Michael Coren, of counsel), for plaintiff.
In this negligence action, defendants Chromalloy Pharmaceutical Inc. ("CPI"), Chromalloy American Corp. ("CAC") and Sequa Corporation move for an order of this Court pursuant to CPLR 3212 granting summary judgment in their favor dismissing plaintiff's complaint because CPI, CAC and Sequa had no connection with the manufacture, sale or distribution of thorotrast, the carcinogen which allegedly caused the untimely death of Ari Rothstein; nor are CAC, Sequa and CPI successors of the corporation which did. Further, CPI, CAC and Sequa are separate corporate entities which have complied with the requisite corporate formalities, to wit: maintained separate boards of directors and officers which met regularly to conduct business, separate books and records, separate management, separate employees, separate assets and are adequately capitalized; thus, no basis exists to pierce their respective corporate veils.
Defendant Tennessee Gas Pipeline Company (hereafter "TGPC") also moves for summary judgment in its favor dismissing plaintiff's complaint against it, because neither it, nor its wholly owned subsidiary Tenneco Resins, Inc. (hereafter, "TRI"), ever manufactured, sold or distributed thorotrast. Further, defendant TGPC notes, assuming, arguendo, that TRI is liable to plaintiff, there is still no basis to impose liability on TGPC because at all times, TGPC and TRI have been separate and distinct corporations which observed all required corporate formalities.
Defendant American Cyanamid Company (hereafter "AmCy" or "Cyanamid") moves for summary judgment in its favor dismissing plaintiff's complaint against it because although it purchased the right to manufacture, sell and distribute thorotrast from Heyden Chemicals Corp. (hereafter "Heyden") the only U.S. manufacturer of said product, it never used the rights, and in fact sold said rights one year later to Testagar and Company (hereafter "Testagar"). Thus, defendant AmCy claims that no basis in law exists to impose liability against it based on decedent's exposure to thorotrast.
In opposition, plaintiff maintains that all defendants are liable as successors in interest to Heyden, the manufacturer of thorotrast, and/or based on the product line exception theory. Further, plaintiff claims defendants are liable to plaintiff based on their own failure to warn users of the dangers of said product.
In 1932, Heyden applied to the American Medical Association's Council on Pharmacy and Chemistry for approval of thorotrast, the pharmaceutical brand name for colloidal thorium dioxide, a radioactive contrast dye used in patients to assist in taking x-rays and making diagnoses. The Council refused to approve thorotrast because of its concern over the safety of administering a radioactive substance into the human body, since such substances were not eliminated and were retained in a patient's liver and spleen. Since the Council's refusal was nonbinding in effect, Heyden, the sole manufacturer of thorotrast, continued to promote and market thorotrast for human administration in the United States.
Plaintiff's husband was exposed to thorotrast as a child during medical testing in a hospital in Washington, D.C. during 1948-1949. As an alleged result of said exposure, Ari Rothstein died in 1988, at age 50, during exploratory surgery, from massive internal bleeding due to an angiosarcoma mass that had developed on his liver.
In 1953, Heyden sold its antibiotic division to AmCy which included Heyden's trademarks, patents, good will and business (including customer lists) relating to thorotrast (and a related radioactive product known as umbrathor). The antibiotic division constituted 20% of Heyden's business and thorotrast was a minor part of said antibiotic line. Pursuant to the sales agreement between Heyden and AmCy dated November 3, 1953, Heyden agreed to indemnify and hold AmCy, its successors in interest and its assigns, harmless from any liability arising out of Heyden's operation of the antibiotic division prior to closing. Further, Art. IV(A)(1) provides:
Article V provides:
"B. HEYDEN agrees to indemnify, defend and save CYANAMID and its subsidiaries and/or their successors and assigns harmless from and against any and all claims of whatsoever nature, including the cost of any litigation thereof, arising out of or in connection with the operation of and conduct by HEYDEN of the business of its Antibiotic Division prior to the closing date hereunder, including, without limitation, claims for infringement of patents, default in performance of contract obligations, nuisance claims and claims or liability arising through violation of any law or governmental regulation."
Following the sale, Heyden remained in business for approximately ten years, but no longer manufactured or sold thorotrast.
Although AmCy acquired all of Heyden's right to the thorotrast product line, it ceased production of the product and so notified the Food and Drug Administration and all of the known users of thorotrast. (AmCy did distribute small amounts of thorotrast to physicians and hospitals.) Instead, AmCy decided to sell the thorotrast product line and, in an offering brochure for the sale of thorotrast, noted that the Heyden Medical Director's file indicated:
(1) Evidence is accumulating that the product causes very serious damages years after even a single dose.
(2) During 1951, at the request of the FDA, The American College of Radiology ... report ... said that Thorotrast should be used only in extreme emergency or where life expectancy is short.
(3) The FDA advised Heyden in 1953 that Thorotrast labeling should carry such a warning to avoid prosecution ...
Further, the following additional information was contained in the Heyden Medical Director's file:
"(1) ... 10/24/53 ... reports of thorotrast deposits in man mention seven deaths attributable to the radioactivity of thorium ...". "... The doses of thorotrast commonly used are carcinogenic".
AmCy sold the thorotrast product line in 1954 to Testagar which had been a distributor of Heyden's thorotrast. In consideration for this sale, AmCy received a cash payment as well as a 5% royalty on all future thorotrast product line sales. AmCy retained the right to send in an independent public accountant to verify the accuracy of Testagar's calculation of the 5% royalty, and restricted Testagar's right to assign the thorotrast product line. In the sales agreement, the parties acknowledged that the thorotrast product line was "highly toxic".
Pursuant to the AmCy/Testagar Agreement, AmCy transferred to Testagar (1) all the equipment and operating instructions of the manufacture and storage of thorotrast; (2) supplies for the packaging and distribution of thorotrast; (3) inventory of the product; (4) historical sales information with respect to the product classified by type of purchaser, costs and sales and profit history; (5) customer lists; (6) good will and trademark rights; (7) information as to the toxicity of the product from the records of Heyden Chemical Corp.'s Medical Director; (8) sales and technical files; (9) labels and inserts prepared by Heyden for distribution of thorotrast; and (10) medical literature regarding thorotrast.
Testagar did not acquire the thorotrast manufacturing plant or accounts receivable from Heyden or AmCy; Testagar did not hire any employees, sales agents or management personnel from either Heyden or AmCy. Further, Testagar agreed to hold AmCy harmless for any claims of personal injury or damages "... arising out of this agreement, the use, handling or inherent characteristics of the materials sold hereunder".
The AmCy-Testagar hold harmless agreement provided:
(This contractual hold harmless provision is analogous to the hold harmless provision in the Heyden/AmCy agreement involving the sale of thorotrast.)
CPI, through various mergers, is a successor corporation of Testagar, which merged into Fellows I (1962), into Fellows II (1971) and into CPI in 1974. CPI was incorporated in 1973 to combine all of the pharmaceutical businesses owned by CAC into one entity; CAC is a diversified corporation, incorporated since 1947, with "core" interests in metal fabrication, transportation, petroleum services and financial services.
After the sale to Testagar, AmCy provided technical support and expertise to Testagar by updating the operating instructions and providing further information regarding the manufacture of thorotrast.
In 1963, Heyden (then known as Heyden...
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